Saturday, April 08, 2006

Decline in Housing Construction Offset by Others

The Conference Board of Canada says strong non-residential and engineering construction will offset a long-anticipated decline in housing starts to maintain industry profits this year.

In its winter construction industry outlook, the board says housing starts peaked in the second quarter of 2005, while rising interest rates and the exhaustion of pent-up demand for housing will result in declining residential construction.

Outlook director Louis Theriault says lower vacancy rates and rising commercial and public spending, along with solid employment growth, are bolstering non-residential construction in the short term.

And with energy prices expected to remain high, the booming oil-gas sector is driving growth in engineering construction.

The board says construction industry profits rose 55 per cent in 2005 to a record $2 billion.

Profits are expected to surpass $2 billion again in 2006, but both material and labour costs are on the rise and will cut into revenues this year and next.

The Conference Board predicts profit levels will weaken in 2007 and will range between $1.4 billion and $2 billion annually through 2010.Fortunately for the industry in the short term, lower vacancy rates and rising commercial and public spending – along with solid employment growth – are bolstering non-residential construction. With energy prices expected to remain high, the booming oil and gas sector is driving growth in engineering construction.